National average savings and money market rates increased by a spread of 0.01% over the last month. Continuing their upward trend, both savings products exhibited interest rate growth after staying roughly flat from 2013-2017.

Traditional banks offer savings rates that range from 0.09% below to 0.90% above the national average and certificate of deposit (CD) rates that range from 0.135% below to 2.68% above the national average. However, even with the positive spread, traditional banking products still lack the necessary return to keep pace with inflation.

Online banks offer savings rates that range from 2.00% to 2.25% above the national average and certificate of deposit (CD) rates that range from 1.81% to 2.69% above the national average. Well above its traditional peers, online banks offer the best savings return and still provide the same Federal Deposit Insurance Corporation (FDIC) protection.

Average Savings Account Interest Rates 2019: Charts, Graph, Analysis

Current National Average Statistics:

While short-term Treasury yields have been on the rise over the last 18-months, average interest rates for savings accounts and money market investments still look rather pedestrian.

Deposit Product:

National Average Rate:

Savings Accounts

0.10%

Money Market Investments

0.18%

And considering both products are insured by the full faith and credit of the US government – what gives?

Well, the crux of the situation is: when interest rates rise, banks never pass on the full amount to savers. While they increase their mortgage rates by the full amount of the hike – say 25 basis points (0.25%) – savers end up with an uninspiring 0.02% to 0.05% raise.

And to that point, considering the Federal Reserve is becoming increasingly dovish by the day – interest rate relief doesn’t seem to be on the horizon anytime soon.

Average Interest Rates: Traditional Banks

When analyzing the table, you can see how the story takes shape.

The largest brick-and-mortar banks offer zero interest rate relief.

With the majority of their savings rates below the national average, only one contributor in our study – Capital One – looks like a decent option. However, considering Capital One brands itself as ‘not your traditional bank’ and promotes a café banking experience targeted toward millennials — it has a business model that’s different from the rest.

Average CD Rates: Traditional Banks Graph

With rates ranging from 0.135% below to 2.68% above the national average, some options allow you to earn a decent return.

However, don’t ignore the downsides.

CDs have:

Higher balance minimums

Fixed maturities

Withdrawal penalties

But more importantly – excluding Capital One and SunTrust — none of the products above allow you to keep pace with inflation.

Familiar with purchasing power?

Well, it works like this:

As the price of goods and services rise in a country, your money becomes less and less valuable. One year from now – assuming 2% inflation — $102 will allow you to purchase the same amount of goods that $100 buys you today.

The point is: If you’re not earning at least 2% on your savings, your wealth is actually decreasing by the day.

Average Interest Rates: Online Banks:

Now we’re getting somewhere.

Unlike traditional banks, you earn a higher interest rate with online banks because they aren’t burdened with the same operating costs.

They don’t have branches. And only use essential staff.

These cost savings allows them to offer higher interest rates and provide you with a much better savings alternative. And considering all of the institutions below are insured to a combined $250,000 by the Federal Deposit Insurance Corporation (FDIC) – online banks are a far better place to park your money.

Average Interest Rates: Online Banks Graph

When analyzing the table, you can see all of the institutions have savings rates that rank above national average as well as allow your money to keep pace with inflation.

A few of the banks – Marcus By Goldman Sachs, Barclays Online Savings and HSBC Direct Savings – are actually online subsidiaries of their traditional brick-and-mortar counterparts. With that, you receive added security as well as the same customer service you’re used to with traditional banks.

Historical National Average Statistics:

To rise out of the worst recession in modern US history, Federal Reserve officials used lower interest rates to pump liquidity into the economy and stimulate economic growth. As you can see – in 2009 – national average savings rates took a steep dive before flattening out from 2013-2017.

Historical National Average Money Market Rates Graph

Questions to Ask Before Choosing a Savings Product:

When deciding which option is right for you, you need to assess factors beyond the creditworthiness of the institution and the interest rate received.

Ask the bank:

Is the interest rate offered a standard rate or a promotional rate?

Is a minimum balance required?

Are there extra fees for account transfers or statements?

Are there withdraw penalties if I exit a CD before maturity?

Elite Personal Finance Recommendation:

When analyzing the data, it’s easy to see online banks offer the best bang for your buck.

With savings rates ranging from 2.00% to 2.25% above the national average and CD rates ranging from 1.81% to 2.69% above the national average — online institutions clearly have a leg-up in the savings department.

As a subsidiary of one of the most prestigious investment banks on Wall Street, Marcus By Goldman Sachs offers brand-power few can rival. More importantly – for its savings accounts — there is no minimum balance and no hidden fees as long as you stay within the Federal limit of six transactions per month.

As a comparison, Citizens Access has a higher savings rate but requires a $5,000 minimum to be eligible.

Now for CDs.

Marcus By Goldman Sachs requires a $500 minimum, but it’s still lower than Discover Bank ($2,500), Citizens Access ($5,000) and Synchrony High Yield Savings ($2,000). As well, Barclays Online Savings, American Express Bank and Ally Online Savings allow zero-minimums for CDs, but their average interest rates are 0.29%, 0.23% and 0.37% lower than Marcus By Goldman Sachs.

Last – and most important – Marcus By Goldman Sachs is a registered member of the FDIC so all savings account and CD balances are Federally insured up to a combined $250,000.

How We Conducted the Study:

To present the most valuable information, we go straight to the source. First, we analyzed national statistics and census data from RateWatch and the Federal Deposit Insurance Corporation (FDIC). Next, we combed through the official website of each bank, crunched the numbers and consolidated the findings to provide the best savings options available.

As well, our study uses the most up-to-date data available in 2019.

Conclusion:

Despite the recent uptick in interest rates, investors shouldn’t get too excited about their future prospects. While the US economy has shown unwavering strength over the last several years, many economists believe we’re near the top of the economic cycle. As well, with US-China trade uncertainty and global GDP growth continuing to slow – future interest rate increases could be few and far between.

To that point, Jerome Powell – Chairmen of the US Federal Reserve – was extremely cautious, insisting the Central Bank won’t raise interest rates until further inflation accelerates.

And what does this mean for you?

Well, it means interest rates will continue to push the ‘lower-for-longer,’ theme forward.

And while advantageous for many borrowers, it provides little relief for the average saver.

Elite Personal Finance

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